You would normally be considered to be in business for tax purposes if you enter into an activity with the intention of running it as a profit-making business, and if the activity is carried out in a way that shows it has a significant commercial purpose and viability. If you sell products or services online, you need to understand whether you are doing it as a hobby or carrying on a business.

While tax law does not provide a detailed definition of a business, the following ‘business indicators’ have been used by various Courts and Tribunals to determine whether a business exists for tax purposes:

  • Does your activity have a significant commercial purpose or character?
  • Do you have more than just an intention to engage in business?
  • Do you have a purpose of profit as well as a prospect of profit?
  • Is there repetition and regularity to your activity?
  • Is your activity of the same kind and carried on in a similar manner to businesses in your industry?
  • Is your activity planned, organised and carried on in a business-like manner?
  • Does your activity have characteristics of size, scale and permanency?
  • Would it be true to say your activity is really better described as a business, rather than a hobby, recreation or sporting activity?

These indicators give general guidance as to whether your activity is a business or hobby. If your activity does not satisfy all of the indicators it does not automatically mean that it is not a business. However, it is likely that, if you answer ‘no’ to all these questions, your activity maybe  considered a hobby.

If you sell products or services online, you need to understand whether you are doing it as a hobby or carrying on a business. When selling online becomes a business, the income you earn from it is subject to tax. If this is the case, you may also be eligible for tax deductions.

  • Did you set up your online sales with the intention of being a business?
  • Do you pay for your online-selling presence?
  • Is your main intention to make a profit?
  • Do you make repeated or regular sales?
  • Do you sell your online items for more than cost price?
  • Do you manage your online selling as if it were a business?
  • Is what you are selling online similar or the same as what might be sold in a ‘bricks and mortar’ business?

compliance made easy package Don’t have time to leave your office to meet with your accountantContact the team at South East Access for more information on business activity Vs a hobby interest.

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